A slow, gradual adoption

Monday, June 30, 2008

YARMOUTH, Maine--There’s excruciating pain at the pump, pressures brought on by recent payment cuts and more reimbursement agony to come as competitive bidding rolls out. If ever there were a time to quit delivering portable oxygen, it’s now.

Yet, sales of Invacare’s HomeFill system were down in the first quarter and portable oxygen concentrators claim no more than single-digit marketshare. Still, manufacturers are no less bullish over prospects for POCs and transfilling oxygen systems, which reduce costly deliveries for providers by allowing patients to produce their own oxygen in the home.

“It’s been a slow, gradual adoption,” said Kristin Mastin, director of marketing for DeVillbiss Healthcare. “But once a provider makes the decision to change, it’s very quick. We see hockey stick type sales.”

Invacare says it has sold about 125,000 Homefill units since 2002. Given roughly 800,000 portable oxygen patients, Invacare can claim a market share just north of 10%. So what happened in the first quarter?

“There were a lot of providers who were taking a wait-and-see position on competitive bidding,” said Joe Lewarski. “A lot of providers were doing fairly rigid asset management, looking under the beds and in between the cracks to make sure they were maximizing their assets.”

Competitive bidding, and its impact on the top-line, makes it hard for HME providers to shell out $3,000 to $5,000 for the transfilling or POC devices, even as the devices are billed as ‘solutions’ for reducing deliveries and allowing providers to do more with less. When it comes to these devices, manufacturers stress the life-time cost over the acquisition price, which can cause sticker shock. (A standard concentrator, by comparison, can sell for as low as $500.)

No one denies the math anymore, said Lewarski. “I rarely encounter someone who pushes back and says those numbers don’t make sense.”

“But it’s still a laborious and cumbersome process, or it’s perceived to be laborious process,” said Mastin. “Look at your entire base and imagine changing the whole entire model.”

At AirSep, they don’t want you to change the model. The model, as is, works just fine for the LifeStyle and FreeStyle, the company’s two lightweight POCs. (The traditional model, presumably, would suit the emergence of Invacare’s new POC, the XPO2.)

“We see a march-up in people embracing POCs and people recognizing that this is the future of home oxygen,” said AirSep President Joe Priest.

Over the past year, AirSep has realized “nearly three-figure percent growth” in its POC line, said Priest.

Traction with consumers is an especially compelling development. Several years ago, AirSep was fielding the occasional call from a consumer about the lightweight POCs. Now, Priest said that 50 to 100 calls per day are coming in from end-users.

Competitive bidding, too, is driving interest in the more expensive products.

“Within competitive bidding areas, there are a lot of people who were not in the market to begin with,” said Priest. “They realize there is great value in not investing in trucks and personnel. They understand the efficiency of coming in with non-delivery.”

The nationals understand something about efficiency, too: There’s too little percentage in upsetting an inventory and a system that’s worked so profitably, for so long.

“It’s not like they don’t like them,” said Priest. “But they have such an enormous infrastructure. It’s not surprising that the largest and greatest acceptance is at independent, small and mid-sized regionals.”

Priest is a believer in the model that complements a lightweight POC with a standard-issue concentrator. Lewarski is less certain that any one model will prevail. The Holy Grail, he notes, is a POC that weighs less than five pounds, pumps five liters per minute at continuous flow and runs for five hours on a single battery charge.

The technology is not there yet, he said. “But we can get close to mimicking that. Everyone is trying to get there in their own way.”

At the same time, as attractive as the 5/5/5 set-up is, he questions the need to get there.
“For many patients, their day revolves around very few trips that last more than two to three hours,” he said.